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Piercing the 'Payoff Function' Veil: Tracing Beliefs and Motives

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  • Guidon Fenig
  • Giovanni Gallipoli
  • Yoram Halevy

Abstract

This paper develops an experimental methodology that allows the identification of decision-making processes in interactive settings using tracking of non-choice data. This non-intrusive and indirect approach provides essential information for the characterization of beliefs. The analysis reveals significant heterogeneity, which is reduced to two broad types, differentiated by the importance of pecuniary rewards in agents' payoff function. Most subjects maximize monetary rewards by best responding to beliefs shaped by recent history. Others are able to identify profit-maximizing actions but choose to systematically deviate from them. The interaction among different types is key to understanding aggregate outcomes.

Suggested Citation

  • Guidon Fenig & Giovanni Gallipoli & Yoram Halevy, 2018. "Piercing the 'Payoff Function' Veil: Tracing Beliefs and Motives," Working Papers tecipa-619, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-619
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    More about this item

    Keywords

    non-choice data; typology; tracking; response-time; coordination; public goods; complementarity; altruism; joy of giving; competitiveness; joy of winning; laboratory experiment;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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